Ecuador Wins Discovery Battle Against Chevron

Chevron must hand over documents that Ecuador believes will help it in arbitration that the oil giant initiated to fight a multibillion environmental verdict, the 9th Circuit ruled Friday.

The arbitration is just one prong of Chevron's multifaceted attack on the 2011 judgment it was handed in Lago Agrio, Ecuador, over environmental damage and public health issues in a rainforest region where Chevron's predecessor Texaco drilled for decades.

Chevron maintains that its adversaries had no right to sue for Texaco's drilling, however, because the Ecuadorean government settled those claims in a 1995 settlement.

Calling its prosecution in Ecuador an abuse of the criminal justice system, in violation of the Bilateral Investment Treaty between the United States and Ecuador, Chevron hopes its will be more successful in international arbitration at The Hague.

Ecuador meanwhile contends that it is being asked to abandon its constitutional guarantee granting its citizens a private right of action. It also thinks two Chevron experts will be helpful to its cause.

One expert is epidemiologist Michael Kelsh, whom Chevron tapped to rebut claims that the drilling caused extensive health problems in the region.

Chevron accuses the Ecuadoreans of ghostwriting the report submitted by court-appointed expert Richard Cabrera, while the Ecuadoreans claim that Chevron manipulated its soil samples.

The Ecuadoreans have also claimed that another Chevron expert named Doug Mackay, an adjunct professor at the University of California-Davis.

In a related proceeding , the Ecuadoreans claimed that Mackay wrote an email to a colleague stating: "I doubt seriously that there never were any significant environment or public health impacts, so I don't want to imply that."

Ecuador petitioned Mackay for discovery on June 3, 2011, and it sought later that month to subpoena records from Kelsh and his employer, Exponent Inc., an engineering and scientific consulting firm.

The magistrate judge hearing the Mackay action ordered Chevron to produce all documents listed on its privilege log other than Mackay's draft reports and certain "communications directly between Dr. Mackay and counsel."

In the Kelsh action, Chevron was ordered to produce certain documents it was withholding.

Having consolidated the orders on appeal, a three-judge panel of the 9th Circuit affirmed Friday, rejecting Chevron's claim that the documents are "presumptively immune."

"The crux of Chevron's argument is that Rule 26(b)(3) always provides presumptive protection for all testifying expert materials because they are necessarily prepared 'by or for' a party or its representative," Judge Consuelo Callahan wrote for the court.

Since Rule 26(b)(3) extends protection to "Materials," and Rule 26(b)(4) then separately provides some protection for "Experts," however, Callahan said, "this strongly suggests that experts were intended to be treated separately from the 'materials' protected under Rule 26(b)(3)."

Aside from possible overlap between the protections for materials and experts, there is nothing in the rule's languages or cross-references to "necessarily indicate that all expert materials are always protected by Rule 26(b)(3)," according to the ruling (emphasis in original).

The ruling goes on to call Chevron's interpretation "redundant" and "implausible."

"There is no indication that the Committee [that advised in the creation of the Federal Rules of Civil Procedure] intended to expand Rule 26(b)(3)'s protection for trial preparation materials to encompass all materials furnished to or provided by testifying experts, which would unfairly hamper an adverse party's ability to prepare for cross-examination and rebuttal," Callahan wrote. "We accordingly reject Chevron's argument."

As the discovery battle for arbitration wages on, Chevron is awaiting a verdict in New York on claims that the Lago Agrio trial amounted to extortion.